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Acquisitions Divestures And Exchanges | 3 Months Ended
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Mar. 31, 2014
Disclosure Text Block |
Acquisitions, Divestures and Exchanges | 5. Acquisitions, Divestitures and Exchanges Divestiture Transaction On November 6, 2012, U.S. Cellular entered into a Purchase and Sale Agreement with subsidiaries of Sprint Corp., fka Sprint Nextel Corporation (“Sprint”). Pursuant to t he Purchase and Sale Agreement, on May 16, 2013, U.S. Cellular transfer red customers and certain PCS license spec trum to Sprint in U.S. Cellular's Chicago, central Illinois, St. Louis and certain Indiana/Michigan/Ohio markets (“Divestiture Markets”) in consideration for $480 million in cash. The Purchase and Sale Agreement also contemplate d certain other agreements, together with the Purchase and Sale Agreement collectively referred to as the “Divestiture Transaction.” Pursuant to t he Purchase and Sale Agreement, U.S. Cellular and Sprint also entered into certain other agreements, including customer and network transition ser vices agreements, which require U.S. Cellular to provide customer, billing and network services to Sprint for a period of up to 24 months after the May 16, 2013 closing date. Sprint will reimburse U.S. Cellular for providing such services at a n amount equal to U.S. Cellular's estimated cost s, including applicable overhead allocations. These services were substantially complete as of March 31, 2014. In addition, these agreements require Sprint to reimburse U.S. Cellular up to $200 million (the “Sprint Cost Reimbursement”) for certain network decommissioning costs, network site lease rent and termination costs, network access termination costs, and employee termination benefits for specified engineering employees. It is estimated that u p to $175 million of the Sprint Cost Reimbursement will be recorded in (Gain) loss on sale of business and other exit costs, net and up to $25 million of the Sprint Cost Reimbursement will be recorded in Cost of services in the Consolidated Statement of Operations. For the three months ended March 31, 2014, $11.3 million of the Sprint Cost Reimbursement ha d been received and recorded in Cash received from divestitures in the Consolidated Statement of Cash Flows. Financial impacts of the Divestiture Transaction are classified in the Consolidated Statement of Operations within Operating income. The table below describes the amounts TDS has recognize d and expects to recognize in the Consolidated Statement of Operations between the date the Purchase and Sale Agreement was signed and the end of the transition services period.
(Dollars in thousands) | Expected Period of Recognition |  | Projected Range |  | Cumulative Amount Recognized as of March 31, 2014 |  | Actual Amount Recognized Three Months Ended March 31, 2014 |  | Actual Amount Recognized Three Months Ended March 31, 2013
(Gain) loss on sale of business and other exit costs, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Proceeds from Sprint |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Purchase price |  | 2013 |  | $ | (480,000) |  | $ | (480,000) |  | $ | (480,000) |  | $ | - |  | $ | -
|  | Sprint Cost Reimbursement |  | 2013-2015 |  |  | (120,000) |  |  | (175,000) |  |  | (92,272) |  |  | (44,631) |  |  | -
| Net assets transferred |  | 2013 |  |  | 160,073 |  |  | 160,073 |  |  | 160,073 |  |  | - |  |  | -
| Non-cash charges for the write-off and write-down of property under construction and related assets |  | 2012-2014 |  |  | 10,000 |  |  | 15,000 |  |  | 11,018 |  |  | 343 |  |  | 222
| Employee related costs including severance, retention and outplacement |  | 2012-2014 |  |  | 12,000 |  |  | 18,000 |  |  | 14,200 |  |  | (62) |  |  | 3,050
| Contract termination costs |  | 2012-2015 |  |  | 100,000 |  |  | 130,000 |  |  | 96,671 |  |  | 37,087 |  |  | 2,900
| Transaction costs |  | 2012-2014 |  |  | 5,000 |  |  | 7,000 |  |  | 5,774 |  |  | 209 |  |  | 918
|  | Total (Gain) loss on sale of business and other exit costs, net |  |  |  | $ | (312,927) |  | $ | (324,927) |  | $ | (284,536) |  | $ | (7,054) |  | $ | 7,090
Depreciation, amortization and accretion expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Incremental depreciation, amortization and accretion, net of salvage values |  | 2012-2014 |  |  | 210,000 |  |  | 220,000 |  |  | 211,656 |  |  | 13,085 |  |  | 38,046
(Increase) decrease in Operating income |  |  |  | $ | (102,927) |  | $ | (104,927) |  | $ | (72,880) |  | $ | 6,031 |  | $ | 45,136
Incremental depreciation, amortization and accretion, net of salvage values r epresents amounts recorded in the specified time periods as a result of a change in estimate for the remaining useful life and salvage value of certain assets and a change in estimate which accelerated the settlement dates of certain asset retirement obligations in conjunction with the Divestiture Transaction. Specifically, for the periods indicated, this is estimated depreciation, amortization and accretion recorded on assets and liabilities of the Divestiture Markets after the execution of the Purchase and Sale Agreement on November 6, 2012 less depreciation, amortization and accretion that would have been recorded on such assets and liabilities in the normal course, absent the Divestiture Transaction.
|  | As a result of the transaction, TDS recognized the following amounts in the Consolidated Balance Sheet:
|  |  |  |  |  | Three Months Ended March 31, 2014 |  |  |
(Dollars in thousands) | Balance December 31, 2013 |  | Costs Incurred |  | Cash Settlements (1) |  | Adjustments (2) |  | Balance March 31, 2014
Accrued compensation |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Employee related costs including severance, retention, outplacement | $ | 2,053 |  | $ | 169 |  | $ | (701) |  | $ | (231) |  | $ | 1,290
Other current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | 13,992 |  | $ | 12,673 |  | $ | (5,950) |  | $ | 792 |  | $ | 21,507
Other deferred liabilities and credits |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Contract termination costs | $ | 30,849 |  | $ | 24,073 |  | $ | (1,924) |  | $ | (8,614) |  | $ | 44,384
(1) | Cash settlement amounts are included in either the Net income or changes in Other assets and liabilities line items as part of Cash flows from operating activities on the Consolidated Statement of Cash Flows.
(2) | Adjustment to liability represents changes to previously accrued amounts.
Other Acquisitions, Divestitures and Exchanges O n March 5, 2014, U.S. Cellular sold the majority of its St. Louis area non-operating market license for $92.3 million. A gain of $75.8 million was reco r ded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations for the three months ended March 31, 2014. On February 14, 2014, U.S. Cellular completed an exchange whereby U.S. Cellular received one E block PCS spectrum license covering Milwaukee, WI in exchange for one D block PCS spectrum license covering Milwaukee, WI. The exchange of licenses provided U.S. Cellular with spectrum to meet anticipated future capacity and coverage requirements. No cash, customers, network assets, other assets or liabilities were included in the exchange. As a result of this transaction, TDS recognized a gain of $15.7 million, representing the difference between the $15.9 million fair value of the license surrendered, calculated using a market approach valuation method, and the $0.2 million carrying value of the license surrendered. This gain was recorded in (Gain) loss on license sales and exchanges in the Consolidated Statement of Operations for the three months ended March 31, 2014.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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